Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. World Surveillance Group Inc. (919742) 10-Q published on Nov 14, 2014 at 4:01 pm
Reporting Period: Sep 29, 2014
The purchase price paid by the Company for LTAS consisted of $250,000 in cash payable on or before the date that is 30 days after the closing of the acquisition (the “Closing”), 25,000,000 shares of the Company’s common stock valued at the acquisition date based on the market price of $0.0269 per share, and an earn-out based on varying percentages of the gross revenues based on the level of revenue from contracts with an identified group of potential customers. No value was ascribed to the earn-out because future revenues, if any, cannot be reliably predicted. Pursuant to the Agreement and an Escrow Agreement, 7,500,000 shares of common stock out of the 25,000,000 shares issued by the Company have been placed in escrow for one year to satisfy possible indemnification claims of the Company. Felicia Hess, the President of LTAS, has entered into an employment agreement to continue in her role as President of LTAS. The Agreement also includes restrictions on the sale of the Company’s securities issued as the purchase price by the Shareholder for a one-year period following the Closing.
The accounts receivable from related party at September 30, 2014 and December 31, 2013 reflects trade receivables due from Global Telesat Communications, Ltd. (“GTCL”) of $63,165 and $59,833, respectively. GTCL is a related party based in the United Kingdom and controlled by a current officer of GTC. Total sales to GTCL for the three-months and nine-months ended September 30, 2014 were $106,918 and $338,061, and account for 22.4% and 25.9% of GTC’s total sales for the respective periods. Total sales to GTCL for the three and nine-months ended September 30, 2013 were $95,641 and $391,646, respectively, and account for 47% and 33% of GTC’s total sales for the respective periods.
On February 1, 2013, GTC issued a $100,000 75-day unsecured 10% promissory note to an individual investor for funds received. On March 18, 2013, GTC issued a $50,000 60-day unsecured 12% promissory note to the same investor for funds received. The Company issued 2 million common shares to the investor as an inducement for the loans, which was amortized as financing fees. On September 26, 2014, the parties amended the $100,000 note to extend its maturity date for six months and add the Company as a guarantor of the note. At September 30, 2014, the Company has repaid the $50,000 note with accrued interest. Loan interest capitalized to debt related to the $100,000 unsecured note for the nine months ended September 30, 2014 totaled $2,745.
Awards of restricted stock are generally subject to forfeiture if employment terminates prior to vesting. Prior to vesting, ownership of the restricted stock cannot be transferred. The restricted stock has the same voting rights as the common stock. The Company recognizes the grant date fair value of restricted stock awards ratably over the vesting period as compensation expense based upon the stock’s closing market price on the vest date. Compensation expense for restricted stock that vested during the nine-months ended September 30, 2014 totaled $95,200. Compensation expense for performance-based restricted stock that vested during the nine-months ended September 30, 2013 totaled $9,312. During the first quarter of 2013, the Company awarded 12 million shares to certain officers as retention bonuses, which were originally slated to cliff vest on February 6, 2014 – all of these restricted shares were rescinded and exchanged for fully-vested options on December 31, 2013. Also during the first quarter of 2013, the Company awarded 4 million shares to certain employees as retention bonuses, which cliff vested on August 7, 2013 for $72,000. On July 29, 2013, the Company awarded 4 million shares for $95,200 with a six-month cliff vest as an employee retention bonus. On September 25, 2013, the Company issued 7,692,308 shares in lieu of $100,000 in accrued employee salaries. Unrecognized compensation relating to unvested restricted stock at September 30, 2014 and 2013 totaled approximately $23,450 and $469,215, respectively.
The Company has issued stock options at exercise prices equal to the Company’s common stock market price on the date of grant with contractual terms of three to seven years. Historically, the stock options were fully vested and expensed as compensation on the grant date. During 2010, the Company began issuing stock options with vesting schedules and such stock options are generally subject to forfeiture if employment terminates prior to vesting. During the nine-months ended September 30, 2014, the Company awarded 41.2 million fully-vested options for $370,000 in retention bonuses; $8,095 in directors’ fees; and $22,006 in consulting fees. The fair value of options issued in a previous period that vested during the nine-month period of 2014 totaled $33,993. At September 30, 2014, there is approximately $45,000 in unrecognized compensation expense relating to unvested stock options. During the nine-months ended September 30, 2013, the Company awarded 2 million options that cliff vest on February 6, 2014 in retention bonuses and issued 900,000 fully-vested options totaling $18,913 as directors’ fees. On July 29, 2013, the Company awarded 12 million fully-vested options totaling approximately $285,600 as share-based compensation. On September 25, 2013, the Company issued 40,355,693 fully-vested options totaling approximately $524,624 for accrued employee salary conversions. Vested options during the nine-month period ended September 30, 2013 totaled $849,594. At September 30, 2014 and 2013, unrecognized compensation expense relating to unvested stock options totaled approximately $45,000 and $92,315, respectively.